STRENGTHS

WEAKNESSES

Tensions on the real estate market

Substantial household debt

Highly concentrated banking sector

RISK ASSESSMENT

Growth will be weaker in 2018, but still dynamic

The Swedish economy is expected to continue its dynamic growth path in 2018, albeit at a slower rate. Headline growth is set to be more in line with the economy’s potential rate, which is estimated at around 2%, according to the OECD. As in 2017, the largest growth contributions will be delivered by private consumption and investment. Consumers’ propensity to buy is boosted by growing employment, increased social transfers, low interest rates, and marginal tax cuts. Real disposable incomes will likely expand at a moderate pace, albeit slightly higher than in the previous years. Driven by a build-up in domestic demand, inflation is expected to stabilise close to the 2% target of the central bank (Riksbank).

Buoyant investment growth in 2017, driven by the upswing in residential investment since 2013, is expected to cool down, because of labour shortage and a lack of constructible land. Nevertheless, the construction sector will continue to fuel growth, while the risks of overheating in real estate activity are reducing. In 2018, government consumption will likely receive a slight boost from a more expansionary fiscal policy. In addition to higher transfers and some tax relief, there will likely be higher expenditures for public employees and for supporting improvements in the social and health sectors. Net exports should marginally support growth.

As a very competitive small and open economy, Sweden will be favoured by a better global macroeconomic environment. Given that global demand for investment goods picked up strongly in 2017, it should remain high in 2018 as well. Hence, Swedish exports are expected to grow by more than 4% again, although this will likely be offset by dynamic import growth. Growth contribution of net exports will therefore be positive, but low. In spite of robust growth, filed bankruptcies are expected to keep increasing, especially in the construction and retail sectors.

Sound public finances, large current account surplus, but high private debt

Despite a more expansionary fiscal stance in 2018, with an expected fiscal package of about SEK 40 billion (Swedish krona), the budget balance will remain in positive territory. Nevertheless, the surplus in structural budget will shrink slightly due to these discretionary measures. With the economy growing rapidly, and the general government sectors being a net lender for years, public gross debt is expected to continue shrinking. In 2017, the debt-to-GDP-ratio, which fell below 40% for the first time since 2012, will probably approach the 30% threshold.

The sustaining of the current account surplus is one clear indicator of the favourable competitiveness of the economy. To some extent, Swedish specialised exports are less dependent on fluctuations in the exchange rates: high quality goods such as machinery (roughly 14% of exports), cars and parts (13%) and electronics (7%) dominate the export basket. Risks from the upcoming Brexit are contained, since UK’s share amounts to just 6% . The primary income, mostly thanks to investment income, contributes positively to the current account balance. The latter’s surplus is expected to decrease slightly because of a somewhat weaker trade surplus.

One key risk for the Swedish economy is the high level in debt of private households. According to Riksbank’s data, private debt-to-disposable income-ratio has risen fast: in mid-2017, it stood at almost 183%, with indebtedness growing faster than disposable incomes. A severe setback in property markets could therefore hamper the highly indebted private household sector, as well as the banking system. The Swedish banking sector is well capitalised but highly concentrated: the country’s four major banks hold about 85% of deposits and loans. Approximately 85% of lending to households consists of mortgages, and almost half of lending to corporates goes to real estate-related operations.

General elections in September 2018

Sweden will probably be ruled by a left-green minority government until the next general elections (September 2018). Although the populist Swedish Democrats party is expected to perform better than in the last elections in 2014, they lost some support, as the refugee crisis has not been as acute as in 2015 and 2016. Therefore, the two biggest parties could win voters’ support back, according to polls conducted in autumn 2017. Furthermore, the Swedish Democrats are quite isolated in the Swedish parliament, meaning that the upcoming Swedish government will likely proceed with an EU-friendly and consensus-based policy stance.

Sweden has one of the most friendly business environments in the world. It notably ranks tenth in the 2018 Doing business ranking.

Last update : January 20178

Payment

Bills of exchange and promissory notes are neither widely used nor recommended as they must meet a number of formal requirements in order to be considered as legally valid.

Just as the rules for issuing cheques have become more flexible, the sanctions for issuers of uncovered cheques have been relaxed over the years. The use of cheques has subsequently become almost non-existent.

Conversely, use of the SWIFT electronic network by Swedish banks provides a secure, efficient, and fairly cheap domestic and international fund-transfer service. Payments are dependent on the buyer’s good faith. Sellers are advised to take great care to ensure that their bank account details are correct if they wish to receive timely payment.

Direct debits represent about ten percent of non-cash payments in Sweden and are quickly growing in popularity. There are two types of direct debit in Sweden: Autogiro Foretag (AGF) for B2B transactions and Autogiro Privat (AGP) for B2C payments. They can both be used for single or recurring payments.

Debt collection

Amicable phase

Amicable settlement aims to recover the debt without transferring the case into a trial procedure. The debtor is informed (either orally or via writing, with written correspondence being preferred) about the debt, the payment deadline and the consequences of not paying the debt. If debtor agrees to pay the debt, both parties may settle on instalment payments through an official document that sets out the contractual terms of the agreement.

Where there is no specific interest clause in the contract, the rate of interest applicable since 2002 is the six-monthly benchmark rate (referensräntan) of the Central Bank of Sweden (SverigesRiksbank), plus eight percentage points. Under the Swedish Interest Act (räntelag, 1975, last amended in 2013), interest on damages is awarded from the 30th day following the day on which the creditor addressed a written claim for damages to the defendant, if the plaintiff so requests. In any event, interest may be awarded from the date of service of the summons application.

Legal proceedings

Fast-track proceedings

Where claims meet some basic requirements (e.g. payment is overdue, mediation was attempted), creditors can obtain an injunction to pay (Betalningsföreläggande) via summary proceedings through the Enforcement Service. The application has to be made in writing and clearly express the grounds of the claim. No further proof needs to be submitted.

This Enforcement Authority (Kronofogdemyndigheten) orders the debtor to respond within a period ten days to two weeks. If the debtor fails to reply in time or acknowledge the debt, a verdict will be rendered on the merits of the original application.

While formal, this system offers a relatively straightforward and quick remedy in respect of undisputed claims, which has greatly freed up the courts. Creditors are not required to hire a lawyer but, in some circumstances, would be well advised to do so. On average, the process takes two months from application to decision. The decision is immediately enforceable.

Court proceedings

If the debtor contests the debt, the creditor has the decision of either turning to the District Court (the first instance,Tingsrätten) or to terminate the process.

Proceedings involve a preliminary hearing in which the judge attempts to help the parties reach a settlement after examining their case documents, evidence and arguments. It is up to the parties themselves to decide what evidence they wish to submit.

If the dispute remains unresolved, the proceedings continue with written submissions and oral arguments until the main hearing, where the emphasis is on counsels' pleadings (defence and prosecution) and examination of witnesses' testimonies.

In accordance with the principle of immediateness, the court bases its decision exclusively on the evidence presented at the trial. Barring exceptional circumstances, the judgement is customarily issued within two weeks thereafter.

As a general rule, the code of civil procedure requires the losing party to bear all legal costs considered reasonable, as well as the attorney fees incurred by the winning party beyond a given threshold claim amount (about SEK 22,250, approximately EUR 2,585).

It takes up to twelve months (in exceptional cases more) to obtain a writ of execution in first instance, bearing in mind that there is a widespread tendency inSwedento appeal against judgements. However, the Government’s target for 2013 is for 75% of the civil cases at district court level to be determined within seven months.

Enforcement of a court decision

As soon as a domestic judgment becomes final, it is enforceable. If the debtor does not comply, comply, the creditor can request the court’s enforcement authority to seize and sell the debtor’s assets.

For awards rendered in a European Union member-state, special enforcement conditions are provided. When the claim is undisputed, the creditor may apply to the European Enforcement Order, or when the claim does not exceed EUR 2,000 EUR, the creditor may start a European Small Claim Procedure. For awards issued in non EU countries, theSvea HovrätCourt of Appeal must recognize an award in order to enforce it, provided that a recognition and enforcement agreement has been signed between the non-EU country and Sweden.

Insolvency proceedings

Out-of court

Swedish law does not formally regulate out-of court arrangements. Nevertheless, creditors and debtors can enter into voluntary negotiations in order to negotiate the debt and reach an agreement.

Restructuring

The aim of restructuring is to find a financial solution for an insolvent company that is deemed to have sustainable long-term business prospects. It can apply for a restructuring with the local court. If approved, the court will appoint arekonstruktörto manage the restructuring. The latter will investigate the financial situation of the company, before establishing and implementing a restructuring plan under which up to 75% of the debt may be written off.

Bankruptcy

Proceedings are initiated as a consequence of a company becoming permanently insolvent. They aim to wind down an insolvent company by selling its assets and distributing any income to creditors. Either the debtor or the creditor can file a petition before the local court. After the court has declared a company bankrupt, it appoints an administrator that independently takes control over the company’s assets with the main task of realising such assets and repaying the debts of the bankruptcy estate in accordance with the creditors’ statutory ranking.